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Economy in Brief

U.S. Pending Home Sales Seeking a Bottom?
by Tom Moeller February 7, 2008

The National Association of Realtors reported that the level of pending home sales in December fell 1.5% from November following that month's decline of 3.0%. These notable declines, however, followed increases during the prior two months. The December decline therefore left sales at the cycle's low set in August. The pattern of sales since then has been essentially sideways.

Despite the sideways movement, the latest monthly figure is about one third below the peak level during the Summer of 2005. The data date back only to 2001.

These figures are analogous to the new home sales data from the Commerce Dept. They measure existing home sales when the sales contract is signed, not at the time the sale is closed.

The Realtors also indicated in an earlier report that the number of homes on the market and available for sale fell 7.4% to 390,500 units in December. That was the lowest level since March. For all of 2007, however, the inventory of unsold homes rose 13.2% after huge increases of 21.2% and 26.8% during the prior two years.

In the Northeast, pending home sales fell 1.7% after a 13.0% m/m decline in November. For the year sales fell 12.6% following 2006's decline of 9.2%. Sales out West also fell a sharp 3.1% after a 2.1% November drop and for the year were down 15.8% after a 14.8% shortfall in 2006.

Sales in the Midwest sales ended the year with a 3.4% gain and since August have shown a very slight upward tilt. For the year sales fell 12.0% after the 12.4% 2006 decline. In the South sales fell another 3.0% in December to a new cycle low. For the year sales in the South fell 15.7% after a relatively moderate 5.5% decline in 2006.

The pending home sales data are available in Haver's PREALTOR database and the number of homes on the market are in the REALTOR database.

Pending Home Sales (2001=100)  December November Y/Y 2007 2006  2005
Total 85.9  87.2    -24.2% 95.9 112.1  124.2
  Northeast 68.9 70.1 -26.0 85.7 98.0 108.0
  Midwest 84.9 82.1 -17.3 89.7 102.0 116.4
  South 96.4 99.4 -27.0 107.4 127.4 134.8
  West 83.9 86.6 -24.1 92.3 109.6 128.7
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